In addition to credit supply, Jia Yinsong, an NDRC official in charge of economic operation, concluded that excessive growth in investment in fixed assets, imbalance in foreign trade and price rises for raw materials are major problems facing China's economic development.

"China's economy is on the right track on the whole but we need to take more financial, credit, land and industry measures to solve problems we face," said Jia.

China's investment in factories, bridges and other fixed assets jumped 30.3 per cent to 2.54 trillion yuan (US$318 billion) in the first five months of this year, way ahead of the government's full-year target of 18 per cent.

Jia said that if the investment in redundant factories and real estate projects ends up being unprofitable, the current surge in lending will result in alarming financial problems.

Last week, the institute even urged the government to apply temporary tax measures to overheated sectors in its report to the government. It also urged it to raise interest rates at a "proper" time.

Lin said China would step up measures to increase imports to correct its increasing foreign trade imbalance. Statistic indicate that China's trade surplus rose to a monthly record high of US$14.5 billion in June after reaching US$13 billion in May, up 49 per cent year-on-year.